A Possible Scenario For 2017: Terminator-Style

I have been scratching my head (and other parts) trying to figure out what's up with 2017.
I mean, the year 2017 does not exist in my consciousness...
http://fatherdaughtertalk.blogspot.com/2014/11/whats-up-with-2017.html

All the other years are there: the painful process of trying to get through the telephone and media attacks running up to the presidential elections of 2016, the hazy future of 2018, a blip for 2019, and a future unclear from then on.
The point is not that the picture is unclear or hazy; the point is, to quote a fine figure and to make a fine point of it, is that 2017...

"...  It's not there, Mac !"

 

 (Donald Moffat as Garry to...

Kurt Russel as MacReady... 

in John Carpenter's The Thing)

Here's a maybe-why or a possibly-might scenario dealing with equity market flash crashes, about which I have written before:
Breakdown: A Glimpse Inside the 'Flash Crash'
By Scott Patterson
June 10, 2012 5:56 p.m. ET
 http://online.wsj.com/articles/SB10001424052702303296604577454330066039896

 [...]
Pools of Darkness

In the weeks and months following the flash crash, a fierce debate erupted over what had become of the stock market. Angry words were exchanged in the halls of Capitol Hill, on financial television shows and at trading firms in New York and Chicago.

Congress held panel discussions. The Securities and Exchange Commission grilled the previously unknown chieftains of the high-speed merchants, including Mr. Cummings of Tradebot and Mr. Peterffy of Timber Hill.

The complex, labyrinthine nature of the market vexed ordinary investors. Years ago, before the rise of electronic networks, most trading took place at the New York Stock Exchange and Nasdaq.

BY 2012, trading occurred in roughly seventy different venues, including giant hedge funds and banks. So-called "dark pools," private markets in which trading took place away from public exchanges such as the NYSE, accounted for more than 10% of all U.S. stock trades, according to Tabb Group.

As the markets slid into discrete pools of darkness, investors, too, had been left in the dark.

It is only our dire lack of imagination that forces us into Terminator 2 and Terminator 3 modes of envisaging the future.

Skynet may destroy the future of many generations of mankind as effectively with a Flash Crash of equity markets, power grids, and many other complex system which have abandoned human oversight and control, as with the robotic armies sweeping through the streets of Los Angeles.

We have trouble imagining the banes to come that we have not yet afflicted ourselves with.

We will have placed the Robot boot upon our skulls.

Despair is worse than slavery.

...

US Equity Markets

 Norway's Flag

We have an unfortunate tendency to be uninformed and desirous of remaining so. It is reflected in our political choices. The most recent elections here contained no mention whatsoever of the US deficit, a topic which was all the rage a few years ago.

If the topic is important, the ignoring of it in a hotly contested election needs explanation.

The explanation is that even the greatest issues are poorly understood, and this ignorance is the breeding grounds of the illiterate frenzy which we are whipped into by politicians and our media. I mean, why should any public figure or media company try to supply real information when ideology is so much more lucrative?

Anyway, the deficit is decreasing. After having sky-rocketed during the years of the Iraq and Afghanistan Wars and a Republican House of Representatives that never saw a spending bill they did not like  (remember Dennis Hastert's time as leader of the House?), the deficit is down to about where it was in the middle of the Reagan years.

So.... success.
A success that electorally seems to mean nothing.
I mean, you would think that that very fact of deficit reduction would be meaningful to the people who were so obsessed by it just 2 years ago; you would think it would be entered under the "feathers in our cap" column, instead of under "black eyes"...  or "Baghdadi beheadings".

The point of this post is our understanding of US equity and bond markets. I will wager that most of us think they are rather massive and monolithic and overly regulated.
Not quite.

In Bloomberg we read:
http://www.bloomberg.com/news/2014-11-16/norway-wealth-fund-outsmarts-flash-boys-as-algorithms-abandoned.html

Norway Wealth Fund Outsmarts Flash Boys as Algorithms Abandoned
By Saleha Mohsin Nov 16, 2014 6:01 PM ET

Oeyvind Schanke, head of asset strategies at Norway’s $860 billion sovereign wealth fund, has worked out how to dodge traders in the U.S. trying to profit on his orders by leaving no pattern for them to track.

Investors who want to pre-empt trades by the world’s biggest sovereign-wealth fund and act on that information to make a profit -- a practice known as front running -- won’t have much success, he said.

“We’ve done a lot to try and avoid leaving those patterns,” Schanke said in a Nov. 14 interview at the Oslo headquarters of the fund. “We’re trading less using algorithmic trading now than we did some years ago and are doing much more trading in large block sizes to avoid pattern-reading.”

Norges Bank Investment Management, which runs the wealth fund as part of the central bank, held about $150 billion in U.S. stocks at the end of September, according to its latest quarterly report. It holds $500 billion in stocks globally and is Europe’s biggest investor. Schanke, who started at the fund as a trader in 2001, oversees which companies and instruments it invests in from NBIM’s London office.


[...]


The investor’s biggest challenge in the U.S. is the fragmented market structure, which has driven up costs across as many as 52 trading venues, introducing a “latency overcharge,” Schanke said.

The market as he sees it “isn’t good enough for raising investor confidence,” which has been an issue in the U.S. since the financial crisis and was deepened by the flash crash of May 2010. While the solution isn’t necessarily public ownership of exchanges, he said a closer look at the existing regulation could help make markets less complicated.

“Some of the things that an exchange does are in a way a utility function,” Schanke said.

The fund in June said it supported Brad Katsuyama’s IEX Group Inc. exchange because it allows “all players to participate on the same terms.” ...

I should think a fragmented market structure is a considerable impediment to our economic dream world "perfect" markets with "perfect" information available to all investors.
And I remember the Flash Crash, and I remember that subsequently people on the Street spoke of almost daily occurrences of computer-induced volatility.

At least the deficit is coming down, even though no one noticed.

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The Rise Of The Robots

 Typical ultra-fast extreme events caused by mobs of computer algorithms operating faster than humans

Typical ultrafast extreme events caused by mobs of computer algorithms operating faster than humans can react.

Read more at: http://phys.org/news/2013-09-sudden-global-ecology-interacting-robots.html#jCp

In this blog we have written of the future flash crashes of financial markets awaiting us, and the fact that, despite the obvious danger of the lack of human control, nothing is being seriously done to slow these systems down and return them to human control.

There is an obvious danger in being so beguiled by technology and the speed by which new things can be contrived and new revenue streams can be constrained to enrich the wealth holders. The danger is that no one is in a position to say, "No."

There is no one in a position to urge a slow approach, and to make sure that our creations do not turn against us... at least, not too horribly.

And turn they will.

It is in the nature of things.

Follow the link and read the article over and over until we understand the Brave New World that is being unleashed upon us.
http://phys.org/news/2013-09-sudden-global-ecology-interacting-robots.html

Recently, the global financial market experienced a series of computer glitches that abruptly brought operations to a halt. One reason for these "flash freezes" may be the sudden emergence of mobs of ultrafast robots, which trade on the global markets and operate at speeds beyond human capability, thus overwhelming the system. The appearance of this "ultrafast machine ecology" is documented in a new study published on September 11 in Nature Scientific Reports. 

The findings suggest that for time scales less than one second, the financial world makes a sudden transition into a cyber jungle inhabited by packs of aggressive trading algorithms. "These algorithms can operate so fast that humans are unable to participate in real time, and instead, an ultrafast ecology of robots rises up to take control," explains Neil Johnson, professor of physics in the College of Arts and Sciences at the University of Miami (UM), and corresponding author of the study.  

"Our findings show that, in this new world of ultrafast robot algorithms, the behavior of the market undergoes a fundamental and abrupt transition to another world where conventional market theories no longer apply," Johnson says...

Machines and algorithms can taken over and control our lives; they do not need to be what we consider intelligent:  they merely have to be a couple steps ahead of us!

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Recently, the global financial market experienced a series of computer glitches that abruptly brought operations to a halt. One reason for these "flash freezes" may be the sudden emergence of mobs of ultrafast robots, which trade on the global markets and operate at speeds beyond human capability, thus overwhelming the system. The appearance of this "ultrafast machine ecology" is documented in a new study published on September 11 in Nature Scientific Reports.

Read more at: http://phys.org/news/2013-09-sudden-global-ecology-interacting-robots.html#jCp

Recently, the global financial market experienced a series of computer glitches that abruptly brought operations to a halt. One reason for these "flash freezes" may be the sudden emergence of mobs of ultrafast robots, which trade on the global markets and operate at speeds beyond human capability, thus overwhelming the system. The appearance of this "ultrafast machine ecology" is documented in a new study published on September 11 in Nature Scientific Reports.

Read more at: http://phys.org/news/2013-09-sudden-global-ecology-interacting-robots.html#jCp

Biological Flash Crash

Yersinia Pestis

In March, 2013, the CDC made statements about the seriousness of antibiotic resistant bacterias. Some are untreatable and have high mortality rates.

There's no political will to address such little things.

The BBC reports today that a squirrel found in the Angeles National Forest in California has been found to be infected with the bubonic plague. The plague - caused by the bacteria Yersinia Pestis - is always deadly, unless treated by antibiotics......

Yersinia Pestis can mutate, too....

Bugs in the programs.

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Future Flash Crash Mystery Theater

I think the future flash crash will be something like this:  at this moment, internet security cannot keep up with the technology; this guarantees there will always be enormous gaps in security. Nobody is going to tell the paying customer that they have to slow down their acquisition of tech, especially in areas, such as finance, where new and faster tech is big money.

It will be tech judo, wherein the attacker uses the defender's own security systems to bring down the defender: counter-attacks will only serve to make the defender's situation worse.

The Future Flash Crash will be an Ironic Vicious Circle: the only way to save one's system is to let down one's defenses.

Turn the other electronic cheek...

But that will never happen. It is a mind-set which is totally alien to us. Oh, such things are all right as long as they are kept under the lock and key of our self-appointed priests and pastors in the jail of Holy Writ, but that's where they should stay.

I seem to recall Star Trek has done a couple of episodes based on this concept, where the more the Enterprise tries to extricate itself, the more stuck it is. And then there's the story of Brer Rabbit and the tar baby...

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The Shape Of Flash Crash To Come

A Flash Crash need not take the form of a financial flash crash.

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Hari Seldon's Time Vault

Hari Seldon

note: I used a photo of Asa Kasher to represent Hari Seldon.

The Time Vault opened again yesterday. Most of my friends do not attend, thinking that "time vault" is some sort of hop, skip, and jump Olympic-type sports thing, only in time as well as space, and they are too jaded to care what prognostications come from the Foundation on Terminus anymore. 

In fact, most of them think that Dune's Shaddam IV is no other than a thinly veiled representation of Saddam Hussein, presciently written just before Saddam came to power in a big way. 

They would rather plug into Big Media: turn on, tune in, and really substantially drop out from anything meaningful.

Anyway, so Hari Seldon pops into view, still smoking a cigarette, by the way. These videos were made many years ago. 

So Hari Seldon is there, and he like sez so, meh, so we're well on the way to a police-military-intelligence-weaponized state, and he paints a pretty good description of the good old USA going around killing blokes with "aero-drones" (as he cutely calls them), and how our habit of killing scads of people who happen to be having tea in the same restaurant that the 3rd most important organizer of Al Qa'ida does, sort of comes back to haunt us by making people want to come here and bomb us.

Oh, then some stuff about flash crashes of stock markets and loss of liquidity...

Yadda-yadda-yadda.

So he ends, like, saying he voted fer Romney, ha-ha, hack and cough, ha-ha... just kiddin' ! But seriously, he sez it's like we already should have the answer of what to do. Doh!

Well, if we had any glimmer of what to do, we would not be traipsing to the time vault, would we? I'm just asking.

--

Future Flash Crash #3

http://fatherdaughtertalk.blogspot.com/2012/03/future-flash-crash.html
 http://fatherdaughtertalk.blogspot.com/2012/03/future-flash-crash-note.html
 http://fatherdaughtertalk.blogspot.com/2012/03/future-flash-crash-note-2.html
 http://fatherdaughtertalk.blogspot.com/2012/06/why-my-banker-thinks-me-mad.html

These are most of the posts on the coming Flash Crash. Of course, if you have been reading the paper (not ogling TV) you know that it keeps on keeping on. In the New York Times Dealbook on August 3, 2012:

 http://dealbook.nytimes.com/2012/08/03/trading-program-ran-amok-with-no-off-switch/

When computerized stock trading runs amok, as it did this week on Wall Street, the firm responsible typically can jump in and hit a kill switch.
But as a torrent of faulty trades spewed Wednesday morning from a Knight Capital Group trading program, no one at the firm managed to stop it for more than a half-hour.
Some Knight employees and New York Stock Exchange officials noticed the blizzard of erratic orders in the minutes after trading started and sent alarmed messages to Knight managers, according to the exchange and Knight employees who declined to be identified discussing the matter.

As Knight struggled to survive on Friday, employees at the company, market overseers and other electronic trading firms were asking the same basic question: Where was the off switch?
Several market insiders said that they were bewildered, because in a market where trading losses can pile up in seconds, executives typically have a simple command that can immediately halt trading.

“Even just a minute or two would have been surprising to me. On these time scales, that is an eternity,” said David Lauer, a trader at a high-speed firm until a year ago. “To have something going on for 30 minutes is shocking.”
Regulators are planning to look into why there was such a lag...

On Friday, Knight, which in the last decade grew into a leading broker for American stocks, climbed off the mat, securing emergency financing that allowed it to continue operating for the day. It also enticed some of its customers to resume sending client stock trades, two days after it disclosed a possibly fatal $440 million loss from the software problem. But it faced a desperate weekend of maneuvering to find a more permanent solution for its woes. Knight’s short-term financing was meant to keep it alive until Monday, when its executives and advisers hope to have deals completed to remove any doubt about the firm’s future.

Our financial system is continually veering out of control, and it seems that no one is willing to face the reality that events happen much too quickly for human beings to keep up with them. There will always be problems, but there is no time left to cope with them and render them harmless.

It is another big wealth-destruction nail driven into the coffins of the middle-class.
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The 2013 Crash

OK, so I'm sounding like NewsMax, the illiterate right-wing rag. I can not help it. We are all mad men thrown together in the world, are we not? We tell our tales, full of sound and fury...

Back on topic now.
The UK suffers from the same kinds of Financial problems we do: an overly complex system which relies upon people who are not skilled enough to administer it, people who are too slow to respond to its fast-as-light workings, and people who are greedy, covetous, and often crooked.

For today's variation on a theme, read the BBC story .

The doomsday scenario for 2013 is:

1) Republicans win White House and a majority in at least one branch of Congress;

2) There is a determined effort to balance the Budget on the backs of the Less-than-Rich;

3) There are problems with China of an as yet undetermined nature: China and the Chinese Communist Party has many problems, and, given that the country is enormous, these problems are enormous;

4) The Banking Sector manages to Flash-Crash, Glitch, Stumble, and Cheat its way into another Bank Failure scenario...

Hello, Saint Leibowitz and the Dark Ages once again.

ps.
You really should familiarize yourselves with the problems of the electronic banking system. Since your own efforts are your best teachers, start studying it.
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Why My Banker Thinks Me Mad

In posting this I am taking you into my deep confidence: why my banker, who is a very understanding type, thinks me very odd, indeed. I am lucky to have found a banker who finds my eccentricities charming, rather than alarming.

Very briefly: I believe that the financial system will implode in 2013, that year being the end of the next interval of catastrophes, intervals equal in length of years to a Fibonacci decreasing series.
Why a Fibonacci series, God only knows. However, I thought it was obvious that the financial system was losing control over what it does: creating money at the speed of light. (And - by the by - the "printing presses of money" which the government is deemed to turn on and off at will are nothing but these here banks... we tend to think the government has its own presses somewhere in Fort Knox.) (see Future Flash Crash)

2013 is a point estimate, and there is probably an error of plus/minus one to two years at least, due to imprecision at the beginning and at the end of the intervals.

My banker walked me through 2011, through the terrors of risks, known and unknown, old and new - the new ones being domestic political risk of having idiots running the government who thought defaulting on obligations to be a "keen" idea. This risk kicked in on August 2, as I recall when the Dow plummeted 500 points.

My banker mentored me, and I owe him a great debt of gratitude. The notion of a stock market debacle is much more nuanced than that horror that exists in my imagination, and my understanding was much improved...

at least until Chase Bank lost $2 billion dollars this year...

and the most biting criticism and analysis about this debacle are written by bankers themselves in financial blogs and banking journals...

and every explanation is another form of "We lost control!"

If and when the Republicans win in 2012, financial regulation will be dead, and I think my fine, fine madness will suddenly seem old news by the end of a few years.
This does not mean the Democrats will avoid this bit of unpleasantness; the Republicans will merely accelerate and confirm it. Both parties are at fault.
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Future Flash Crash Note # 2

Referring to "Future Flash Crash" and "Future Flash Crash Note" posted today, I think the point I missed was that we have an economic system of Boom or Bust.
It is pretty obvious and just about everyone knows it. When we are in the Boom phase and cycling upwards, every one is happy and every one is on cable touting stocks to buy. When we cycle into the Bust phase, Suze Orman is on cable telling us to cut up our credit cards and Congress is trying to cut our health care. It varies in some details, but it is pretty much the same schtick each time: Boom or Bust.

We have entire university departments devoted to the science of Boom or Bust. Most of the anti-green movement is devoted to Boom or Bust, sensing in their deep, overlayered ganglia that somehow the Greens want to do away with the Bust phase, probably by moderating the Boom phase, and that smells of the Latakia tobacco smoked by Socialism!

Boom or Bust: learn to love it.
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Future Flash Crash Note

Somebody just now asked me, referring to the post "Future Flash Crash"
http://fatherdaughtertalk.blogspot.com/2012/03/future-flash-crash.html

why we plunge so heedlessly (according to my opinion) ahead on these schemes which may turn out to be harmful.

The answer is Money.
There is more money to be made applying new technology, rather than in making sure it is human and humane and actually good for the planet.

There are absolutely NO lobbyists in Washington lobbying for us and the Earth... at least, none with any money to throw around.
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Future Flash Crash

 Man On A Wire... Philippe Petit at the World Trade Center

Some time ago I said that the next "big debacle" our system of economics and politics will have for us will be a breakdown of the electronic system of finance: the machine will just stop. I think I may have said it just after the flash crash of 2010; I may have said it after reading about banks establishing centers in various parts of the globe to grasp at a 10 nano-second advantage at some wondrous arbitrage in 2011.

Anyway, you get the drift: the system stops. Why? Because we really do not have total control over it. Our control is rather tenuous, at best; things go awry:  large cruise ships run into islands in the broad daylight because the captain is waving at the islanders, markets fall 1,000 points, enormous banks cannot live without cash infusion from the middle class taxpayers, and the energy grid is woefully in disrepair, and the litany of woe goes on.
Add to that the fact that if you have the temerity to throw a handful of Skittles at someone bossing you around, they may shoot you dead, well, you have a society that is doing a good imitation of Philippe Petit doing "Man On A Wire" after a drunken debauch.

How are the plans of the Best and the Brightest coming along?
From Reuters:
http://www.reuters.com/article/2012/03/24/us-bats-trading-idUSBRE82M0W020120324?feedType=RSS&feedName=topNews&rpc=71

In a breakdown that resembled a mini version of the 2010 "flash crash," a series of glitches hit the market debut of BATS Global Markets Inc on Friday, causing the company to take the extremely rare step of withdrawing its initial public offering of shares.
The problems caused the shares of exchange operator BATS to plunge from their $16 offering price and briefly trade for less than a penny on Friday morning, creating havoc in the marketplace and again calling into question the stability of high-speed trading...

"The public should take comfort that circuit breakers are working as they should after the flash crash," said Holly Stark managing member of Efficient Frontiers, a market structure consulting firm in New York.
Since the May 2010 "flash crash" in which nearly $1 trillion in market value disappeared in minutes, the Securities and Exchange Commission under Chairman Mary Schapiro has pledged to crack down on problems in the high-speed electronic marketplace, which regulators worry has grown unstable and perhaps unfair as high-frequency trading has grown in prominence.
The BATS breakdown could trip up, once again, the march over the last decade toward increasingly automated markets in the United States, Europe and elsewhere...

 "It's just another black eye for the fragmented equity structure," said Joe Saluzzi, co-head of equity trading at Themis Trading in Chatham, New Jersey, and a frequent critic of U.S. equities market structure. "Every day we see things like flash crashes and now IPOs that can't get off the ground."

I added the emphasis... did you read that the same way I read it? "Every day we see things like flash crashes..."! "Every day..."??!!

OK. These are the same caliber of minds that are bringing us Genetically Modified Food and new improvements in fossil fuels.

Take Shelter!, as the film of the same name says.

Joe Ratterman, founder of BATS, in better times in 2010

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Then and Now

Siefried Kracauer

Reading Siegfried Kracauer's great book From Caligari To Hitler: A Psychological History of the German Film published in 1947.  In the present section, he is writing of the German films in the early years of The Great Depression, and has just finished discussing UFA's production of Mensch Ohne Namen (Man Without A Name) made in 1932 and starring Werner Krauss.
The next paragraph begins:

Times were indeed so bad that even qualified specialists could not count on re-employment once they had been dismissed.

Indeed! I have been reading of unemployed professionals - engineers and educators and more - that have been cut off from the business of their speciality for three years now. This is one reason why unemployment benefits have been extended, and this bit of largesse is - of course - under scrutiny by the conservative element.
Well, 99 weeks of benefits is a lot. Goes to show one how things really are here in Arcadia, I guess.

Kracauer picks up the thread with a discussion of Die Gräfin von Monte Christo (The Countess of Monte Cristo) of 1932, another UFA film. Brigitte Helm is cast as a film extra cast as a leading lady. While shooting at night, she drives her luxury car used in the film to a real de luxe hotel, where she is treated royally because of her impressive luggage emblazoned with "Countess of Monte Cristo".
Things happen, and eventually she is found out. With a flair for publicity, the film company soothes over things with the hotel and turns the escapade into a great front-page story which is good for everyone involved: the film is on everyone's lips and she gets a good contract.
So ends that story,

...proving conclusively what all these screens opiates tended to demonstrate: thateveryday life itself is a fairy tale.

Notice how that rings a bell: from fathers seeking to save sons who were supposedly blown away in rogue balloons to good looking people whose only aim in 2009 seemed to be to crash a White House dinner and gather notoriety from it to people exposing way too much on the interenet to flash mobs which have become so common that they are debased into looting zombie hordes.
It sounds so much like Reality TV, which itself is crudely and cheaply scripted, and is so remote from "reality" that when a member of the cast commits suicide, all references to such unpleasantness have to be removed from the film already shot... all this in order to maintain the diseased  fairy tale illusion of our modern lives.

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